Commercial Software Licensing

(1)

Cloud-SaaS Deployment Models

Commercial Software Licensing

Cloud-SaaS Deployment Models

(2)

Chapter Overview

• Most software licenses today are either perpetual or subscription.

• Perpetual licenses involve software possession by the customer

who dictates where deployment takes place:

–

In the customer’s IT environment.

–

In a third-party hosting company environment selected by and paid for

by the customer.

• Subscription licenses seldom involve physical possession of software

by the customer. Software is typically deployed outside the

customer’s IT environment:

–

In the Publisher or Reseller IT environment.

–

Or in a third-party environment selected and paid for by the Publisher or Reseller.

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Chapter Overview (cont.)

• The evolutions of cloud computing and virtualization have led to more

sophisticated hosting models.

• Cloud computing provides three levels of third-party service offerings:

–

IT infrastructure.

–

Computing platform.

–

Software.

• Differentiation among the three levels of cloud hosting services

concerns the level of control passed to the Contractor.

(4)

Commercial Software Licensing:

Chapter Objective – Define & Clarify…

(5)

Comparing Basic License Types

Perpetual/

On Premises

• No specific time limit.

• Customer takes possession of software.

• Customer responsible for IT environment.

• Customer responsible for software maintenance.

Subscription/

Off Premises

• Term is limited.

• Customer does not take possession.

• Contractor provides IT environment.

• Contractor provides all system maintenance.

(6)

Software Deployment Models

6 Customer Site

Hosted

with Services

(ASP, MSP)

Hosted

in a Cloud

(7)

Software Deployment Models

• Deployment of software at a customer site involves all aspects of

the IT environment:

– Properly sized hardware.

– Sufficient network bandwidth.

– Firewall and other security measures.

– Appropriately trained staff to manage the operation of the

software and every element of the IT environment.

Customer Site

• Hosted deployment, without other services, typically involves

deploying software in an IT environment managed by a third party.

• Limited hosting is restricted to the hardware, security, connectivity,

and networking aspects of the IT environment.

Hosted

(8)

Software Deployment Models (cont.)

• Takes the pure hosting model to the next level by adding key services.

• Different types of providers deliver added services for implementation,

support, upgrades, fixes, etc.:

– Application Service Provider (ASP).

– Managed Service Provider (MSP).

Hosted with Services

• The “cloud” concept is a hosting environment built around virtual

servers, for optimization of hardware and other infrastructure resources.

• The progression of cloud service options ranges from:

– Infrastructure as a Service (IaaS),

– to Platform as a Service (PaaS),

– to Software as a Service (SaaS).

Hosted in a Cloud

(9)

What is Cloud Computing?

• Cloud computing can be thought of as turning software from a product into

a service—viewing it much like a utility, such as electricity or water.

• Moving from traditional in-house software deployment to Cloud-based

software could be compared to switching from a privately owned and

operated well system to a public water system with a tap in your house.

Cloud Computing Analogy

• Public clouds host many applications from many customers.

• Private clouds, usually hosted in a private environment, are created to run

multiple applications for a dedicated customer.

• Hybrid clouds have both public and private cloud aspects.

• Community clouds are created to serve a group with common interests,

concerns or requirements taking advantage of some of the cost savings

available from public clouds along with some of the privacy aspects of

private clouds.

Public , Private, Hybrid and Community Clouds

(10)

Changing Characteristics

Need collaboration for service

Some network access

Multiple resources

Broader scalability

Optimization tools

Cloud

On-demand self-service

Broad network access

Resource pooling

Rapid elasticity

Automatic optimization

(11)

Cloud Deployment Models

Type >

Public

Where?

Off premise

at provider

Who?

General public

What?

Users’ concerns

and purposes

vary

Community

On or off premise

Multiple, related

organizations

(12)

What is SaaS? – A Timeline Approach to

Understanding SaaS

(13)

What is Virtualization?

The Basics

13 • Virtualization is a key element of cloud

computing, although it can also be implemented

in other IT environments. It provides added

efficiencies and flexibility to manage complex

IT environments.

• The virtualization process allocates the

resources of a single physical device—server,

storage device, or network resource—into

multiple “virtual” imitations of the hardware

environment, with each functioning

independently.

• In server virtualization, a layer of software

called a virtual machine monitor or hypervisor is

installed between the “host” server’s physical

central processing unit (CPU) and the “guest”

virtual machines, to manage communication

between those layers.

• This enables a user to transcend limitations

of the “one machine, one server” model, to

satisfy diverse needs efficiently with a single

hardware unit.

Virtual Machines

General Business Apps Specialty Apps General Apps

Windows OS Linux OS Mac OS X

Shared Physical Hardware

(14)

Cloud – SaaS Comparison

14 Cloud

SaaS

A set of technologies for hosting

and accessing software.

A business model for licensing

and accessing software.

The hosting technologies include all infrastructure components including servers, networks, data storage, operating systems,

virtualization, etc. Access is usually via the internet. A cloud offering may or may not include application

software as part of the package.

The license grant is a “right to use for a term” with no physical possession of the software by the customer. Payment is usually subscription based with monthly,

quarterly or annual payments.

It is possible to deploy a perpetual license in a cloud. That combination would not be a SaaS offering. When a cloud is

combined with a subscription software license, that combination is a SaaS offering.

When application software is offered in a SaaS model, all infrastructure components are included. Access is usually via the

internet. This combination can be thought of as deploying an application in the cloud. It is possible to grant point to point access in

a SaaS model, technically taking the deployment out of the cloud.

The hosting technologies can be on or off premise.

Since the subscription model does not include physical possession of the licensed application, SaaS licenses

are by definition deployed off premise. The hosting technologies can be deployed in a public, private,

hybrid or community cloud. Public clouds by definition are off premise. The other three types can be either on or off premise.

Publishers offering SaaS licenses might own the cloud technologies or they might use third parties for some

or all of these technologies. For off premise clouds, the access or connectivity technology

is the internet. Remote users in a private cloud might also use the internet to connect.

Publishers might offer multi-tenant or single tenant SaaS licenses. Some implications of multi-tenancy include Publisher directed

(15)

SaaS Characteristics Multi- v. Single-Tenancy

15 Multiple

tenants all share

the same resources.

Each

Single

tenant accesses its own

allocated portion of each resource.

(16)

Single- v. Multi-Tenancy in SaaS Environments

• Multi-Tenancy

–

Multiple tenants (organizations) share same infrastructure

and same instance of software

–

Simplified approach saves costs, but restricts

customization and can raise security issues.

• Single-Tenancy

–

Each tenant (organization) runs their own unique instance

of the software, separate from other tenants.

–

Permits robust customization and assures database

isolation for security, but at a higher cost.

(17)

IaaS

Infrastructure

as a Service

HOST

PaaS

Platform

as a Service

BUILD

SaaS

Software

as a Service

CONSUME

The Recent Evolution of SaaS

Deployment Models

(18)

From On Premise to SaaS

Who is in Control of the Stack?

(19)

Are we Clear About SaaS and Cloud?

• True or False—cloud computing and

SaaS are synonymous.

• True or False—a perpetual license

can be deployed to the cloud.

• Cloud computing requires which of the following?

–

Internet connections

–

Virtualization

–

SaaS licenses

–

Remote data storage

–

A special operating system

(20)

Example: Music

Hosted: iTunes®

Off premise

Use provider’s portal

to play music

Accessed from anywhere

there is internet access

License to listen in

perpetuity

SaaS: Pandora®

Off premise

Use provider’s portal

to play music

Accessed from anywhere

there is internet access

License to listen only while

subscription is current

Traditional: CD

On premise

Need your own

equipment to play music

Accessed only if in

possession of CD and onsite

License to listen in

(21)

Reasons for Using Cloud Computing

• Aside from the OMB mandate, what are key business reasons for

deploying to the cloud?

–

Cost reduction

–

Speed & flexibility

–

Greater mobility

–

Easier collaboration

–

Heightened security

• Each of these factors can be challenged, but the most interesting

claim is that Cloud Computing saves money.

• What is it about SaaS licenses that leads to potential cost savings?

(22)

Questions About Potential Cost Savings

• SaaS licenses generally provide all software and services needed to operate a

business application, including:

–

Application & Related Software Licenses

–

Maintenance (fixes, patches, upgrades) & Support

–

Infrastructure & Facilities

• Since a SaaS subscription license price includes all those elements, how can

you tell whether corresponding internal costs will go away?

• Will you end up paying twice for certain items (e.g. servers) if they do not leave

your internal environment as a direct result of a SaaS license?

• How do you know a SaaS cost is lower than an internal cost for an item?

• Since you may license a variety of applications from a variety of SaaS vendors,

do the economies of scale from each vendor outweigh the aggregate internal

economies if you hosted all those apps on premise?

(23)

Perpetual-SaaS Comparisons

28 Standard Product

Year 1

Year 2

Year 3

Year 4

Year 5

5 Year Total

Perpetual License

$

2,000,000

$

2,000,000

Maintenance & Support

$

400,000

$

400,000

$

400,000

$

400,000

$

400,000

$

2,000,000

Hosting Expenses

Charged

$

120,000

$

120,000

$

120,000

$

120,000

$

120,000

$

600,000

Total

$

2,520,000

$

520,000

$

520,000

$

520,000

$

520,000

$

4,600,000

SaaS Product

Year 1

Year 2

Year 3

Year 4

Year 5

5 Year Total

Annual Subscription (3

year amortization)

$

1,533,333

$

1,533,333

$

1,533,333

$

1,533,333

$

1,533,333

$

7,666,667

Annual Subscription (5

(24)

Other Factors to Consider About Cloud Benefits

• Flexibility

–

Switching from one SaaS vendor to another could be less

costly than switching from one perpetual vendor to another

for the same application.

–

Would it be as easy to switch email providers as it would be to

switch ERP SaaS vendors?

–

What about customization?

–

What about control over the timing of upgrades?

–

Is virtualization limited to the cloud?

–

How do you put a price on flexibility gained or lost?

(25)

Other Factors to Consider About Cloud Benefits

• Heightened Security

–

Even if all infrastructure is outsourced, does it make

sense to outsource data security?

• Analytical Approaches

–

A consistent approach to analyzing prices and internal

costs is a mandatory prerequisite to gauging cost savings.

–

Should savings be measured on a deal basis or a

collective basis?

(26)

Data Ownership & Data Security

in SaaS Environments

• The government should always own its data at all times and all places.

• In a SaaS arrangement, it is likely the government’s data will be stored

outside the physical control of the government. This raises ownership

and security concerns.

• The ESI BPA Master EULA includes language guaranteeing the

government’s ownership rights over its data, including the obligation of

the service provider to provide the data to the government upon

demand at no additional charge in a useable format (CSV or as

otherwise requested by the government).

(27)

Discussion Guide

Compare and contrast perpetual software licenses vs. subscription licenses.

Describe and discuss software deployment options and the types of

hosting services available.

Discuss cloud computing, what it is, how it works.

Discuss virtualization and its role in cloud computing.

Discuss the three levels of services currently used in hosting models, their

similarities, their differences, and their impacts on licensing decisions.